Market Recap: Markets go From Euphoria to Despair on Spain Bank Rescue

Markets closed down today:

▼ Dow: -1.14 percent

▼ Nasdaq: -1.70 percent

▼ S&P: -1.26 percent

Precious metals:

▲ Gold: up +0.41 percent to $1,590.30 an ounce

▲ Silver: up +0.14 percent to settle at $28.41

Commodities:

▼ Oil: -3.46 percent

Markets were down because:

A burst of enthusiasm over a rescue of Spanish banks melted away Monday within hours, and investor anxiety about the troubled finances of Europe grew on both sides of the Atlantic.

On Wall Street, stocks opened sharply higher but sank all day. Selling only accelerated in the last hour of trading, and the Dow Jones industrial average closed down 142 points.

More alarming, bond investors signaled that they are less confident about lending money to the governments of both Spain and Italy, which investors fear will be next to seek help.

The rescue, announced Saturday, figured to soothe financial markets. Instead, it inflamed them.

Investors are already worried about weaker U.S. job growth and an economic slowdown in Asia. And the next flashpoint in the Europe crisis is just days away - an election in Greece on Sunday that could speed that country's exit from the euro.

European countries committed to funnel up to $125 billion to Spain to distribute to its banks, which have been driven almost to insolvency from a bust in real estate prices four years ago.

Spain became the fourth European nation to seek a rescue, after Greece, Portugal and Ireland.

Particularly over the past six weeks, financial markets have worried that the debt problems in Europe will explode into a world financial crisis and hurt the fragile global economy.

Those strategists had predicted a rally in stocks after the deal was announced. But the relief was short-lived.

In the United States, the broader market drifted lower all day. The Standard & Poor's 500 index ended down 16.73 points at 1,308.93, and the Nasdaq composite index closed down 48.69 points at 2,809.73.

The Dow finished down 142.97, one of its biggest daily declines this year, at 12,411.23. It opened up almost 100 points.

The cost of insuring Spanish government debt rose almost to a record high, suggesting investors are more nervous about a Spanish government default, according to Markit, a financial information company.

Finance ministers of the 17 countries that use the euro currency said they would make the $120 billion available to the Spanish government to distribute to its banks.

Bond investors were worried that the debt from the rescue package would put additional strain on Spain's finances, though. The European Union made clear Monday that there would be some strings attached besides interest.

Adding to the economic fear, Italy said its economy contracted by 0.8 percent in the first three months of the year, the worst showing in three years. The Italian government is struggling to fend off the perception that Italy will be next to need a rescue.

The Associated Press contributed to this report.